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Fukui's Monthly News Letter

Consider more than gear price

The business of Aquaculture is just that, a business! The purpose of a business is to make a profit.

An operation's fixed and semi-fixed expenses, wages and related employee costs, have to be paid and working capital for future expansion and maintenance has to be provided.

After that, the shareholders or sole owner gets a return on their investment of time and money.

But that can be far easier to say than to accomplish. The profits that you deserve out of any business can be minimal at best if you do not plan carefully.

While there are many factors contributing to the financial success of your operation, this column will focus on gear selection - what to look for in Aquaculture equipment and what it will mean to your overall yield. After all, that is what translates to your bottom line profit and a return on investment.

When it comes to purchasing products or services, many of us have developed a price-shopper mentality. We look only at cost and not at the worth of what we are about to purchase.

But many times a product that costs slightly more will do a much better job and last longer.

So it is important to evaluate the worth of the gear you are thinking of buying.

There are three components to consider when you look at the worth of the gear you require; A) Product Quality, B) Efficiency, and C) Labour or Handling Cost.

Product Quality

Would you purchase a piece of gear that cost 15 percent more if it would last for five years instead of the normal two years? The answer, of course, would be "yes". The alternative over the two-year period is buying the less costly piece of gear two and a half times.

For example, let's say that the gear with a two-year life costs $10, and the gear with a five-year life cost 15 percent more or $11.50. At the end of five years, replacing the cheaper gear two and a half times costs $25 - assuming no price increases. So, instead of saving 15 percent or $1.50 from the initial purchase prices, you actually spent $13.50 more.

Efficiency

Sometimes you have an option of buying gear that has, for example, 25 percent more usable yield area yet cost approximately only 10 to 15 percent more then the standard size product. Over the lifetime of the gear, if you consistently experience higher production yields, paying the extra upfront cost will be a wise choice, because it means an increase in return on investment.

The rule here is to examine what the gear will produce for you in yield or useable grow out area.

Labour Cost

Labour cost should be considered for the present as well as throughout the expected life of the product. If you can reduce your labour cost by 10 to 50 percent through the function of ease or less handling by purchasing a better quality more efficient equipment, then once again you will increase your return on investment.

A good example is in Finfish farming where there is a regular labour cost associated with the constant cleaning and replacement of net mesh. Using polyester instead of nylon netting may add 15 to 20 percent to the capital cost, but the differences in ease of handling - and thus reduced labour cost over the life of the netting - can be significant.

The same can be shown for Shellfish. There are two similar lantern cages. One costs 30 percent more but can be unloaded and reloaded in half the time. Even if you only use the cage 10 times, the 30 percent extra cost will be returned many times over.

At the recent Aquaculture America show in Arlington, Texas, a finfish farmer looked at one of our pieces of gear. The first statement he said to me after examining it for a few minutes was " I can make money with that". He didn't ask the cost until the end of our conversation - which, incidentally, was half of what he had expected. The point is that he was first figuring the worth of the gear and how it was going to provide him with a return on the investment.

It is very important to remember that you are purchasing gear to make a profit. The decision-making process is not the same as making a trip to the mall to search the sales - where we, as consumers, are conditioned to look for cost instead of worth.

I am not suggesting that you should always pay the highest price. What I am saying is to make sure you run your operation like a business. Set your goals or targets, and then work your plan to get the return on investment that you deserve. Ask lots of questions to specialists in the field and find out who is succeeding and why.

In the next issue of FFN, I will explain how to tell the differences in the materials used in Gear manufacture and how to identify the quality differences for both Finfish and Shellfish farming.


Contact Don Bishop at:
Fukui North America
PO Box 669
110-B Bonnechere St.W.
Eganville, Ontario K0J 1T0
CANADA
Tel: 613-628-1704
Fax: 613-625-2688
Email: kate@fukuina.com

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